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Dr. Philip Kotler Value-Based Marketing
 

Dr. Philip Kotler Answers Your Questions on Marketing

Questions:

  1. Which megatrends do we have to consider for the future?
  2. In your books, you have pointed out that globalization, hyper-competition and the Internet reshape markets and businesses.  What effect are these dynamics having on marketing?
  3. What is Marketing?
  4. What would you consider among the chief misconceptions about effective marketing that are still operating in today’s companies.  Who isn't "getting" it?
  5. When did Marketing first appear?
  6. What is the mission of marketing?
  7. You say that marketing must play the lead role in shaping business strategy. Do you think that business executives are fully aware of the role that marketing can play in helping the company succeed? 
  8. You have said that if a company’s marketing department can’t propose any new opportunities, they should be fired.  But are there many good opportunities still left? 
  9. What significant business opportunities would you identify in the evolving economy?

 

Answers:

1. Which megatrends do we have to consider for the future?

The economic landscape has been fundamentally altered by technology and globalization.  Companies anywhere can now compete anywhere, thanks to the Internet and more free trade.

The major economic force is hyper-competition, namely companies are able to produce more goods than can be sold, putting a lot of pressure on price.  This also drives companies to build in more differentiation.  However, a lot of the differentiation is psychological, not real.  Even then, a company’s current advantage doesn’t last very long in an economy where any advantage can be copied rapidly. 

Companies must pay attention to the fact that customers are getting more educated and have better tools such as the Internet at their disposal to buy with more discrimination.  Power has been passing from the manufacturer to the distributor, and now is passing to the customer.  The customer is King.

 

2. In your books, you have pointed out that globalization, hyper-competition and the Internet reshape markets and businesses.  What effect are these dynamics having on marketing?

All three forces act to increase downward pressure on prices. Globalization means that companies will move their production to cheaper sites and bring products into a country at prices lower than those charged by the domestic sellers. Hyper-competition means that there are more suppliers competing for the same customer, leading to price cuts. And the Internet means that people can more quickly compare prices and move to the lowest cost offer. The marketing challenge, then, is to find ways to maintain prices and profitability in the face of these macro-trends. No country’s industry is going to hold on to its customers if it can’t continue to lead in offering the most value. And the answer has to be: better targeting, differentiation and branding.

At the same time, various world regions are becoming more integrated and more protective.  The members of a region are seeking preferential terms from the other members of the region.  But artificial trade preferences cannot last long against a substantial deterioration of value.

 

3. What is Marketing?

Marketing is the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit.  Marketing identifies unfulfilled needs and desires. It defines, measures and quantifies the size of the identified market and the profit potential. It pinpoints which segments the company is capable of serving best and it designs and promotes the appropriate products and services.

Marketing is often performed by a department within the organization. This is both good and bad. It’s good because it unites a group of trained people who focus on the marketing task. It’s bad because marketing activities should not be carried out in a single department but they should be manifest in all the activities of the organization.

In my 11th edition of Marketing Management, I describe the most important concepts of marketing in the first chapter.  They are: segmentation, targeting, positioning, needs, wants, demand, offerings, brands, value and satisfaction, exchange, transactions, relationships and networks, marketing channels, supply chain, competition, the marketing environment, and marketing programs.  These terms make up the working vocabulary of the marketing professional.

Marketing’s key processes are: (1) opportunity identification, (2) new product development, (3) customer attraction, (4) customer retention and loyalty building, and (5) order fulfillment.  A company that handles all of these processes well will normally enjoy success.  But when a company fails at any one of these processes, it will not survive.

 

4. What would you consider among the chief misconceptions about effective marketing that are still operating in today’s companies.  Who isn't "getting" it?

Marketing is a terribly misunderstood subject in business circles and in the public’s mind. Companies think that marketing exists to support manufacturing, to get rid of the company’s products. The truth is the reverse, that manufacturing exists to support marketing.  The company can always outsource its manufacturing. What makes a company is its marketing offerings and ideas.  Manufacturing, purchasing, R&D, finance and the other company functions exist to support the company’s work in the customer marketplace.

Marketing is too often confused with selling. Selling is only the tip of the marketing iceberg.  What is unseen is the extensive market investigation, the research and development of appropriate products, the challenge of pricing them right, of opening up distribution, and of letting the market know about the product.  Thus, Marketing is a far more comprehensive process than selling.

Marketing and selling are almost opposites. Hard sell marketing is a contradiction. Long ago I said: “Marketing is not the art of finding clever ways to dispose of what you make.  Marketing is the art of creating genuine customer value.  It is the art of helping your customers become better off.  The marketer's watchwords are quality, service, and value.”

Selling starts only when you have a product.  Marketing starts before there is a product.  Marketing is the homework the company does to figure out what people need and what the company should make.  Marketing determines how to launch, price, distribute and promote the product/service offering in the marketplace. Marketing then monitors the results and improves the offering over time. Marketing also decides when to end the offering.

All said, marketing is not a short-term selling effort but a long-term investment effort.  When marketing is done well, it occurs before the company makes any product or enters any market; and it continues long after the sale.

 

5. When did marketing first appear?

Marketing started with the first human beings.  Using the first Bible story as an example (but this was not the beginning of human beings), we see Eve convincing Adam to eat the forbidden apple.  But Eve was not the first marketer. It was the snake that convinced her to market to Adam.

Marketing as a topic appeared in the United States in the first part of the 20th century in the teaching of courses having to do with distribution, particularly wholesaling and retailing.  Economists, in their passion for pure theory, had neglected the institutions that help an economy function.  Demand and supply curves only showed where price may settle but do not explain the chain of prices all the way from the manufacturer through the wholesalers through the retailers.  So early marketers filled in the intellectual gaps left by economists. Nevertheless, economics is the mother science of marketing.

Marketing is more of a craft and profession than an art form.  The American Marketing Association and the British Chartered Institute of Marketing are independently working on professional credentials for professional marketing.  They believe that tests can be constructed that can distinguish between qualified marketers and phony marketers.

At the same time, many people will originate brilliant marketing ideas who are not trained marketers.  Ingvar Kamprad was not a marketer and yet his IKEA company is phenomenally successful in bringing good quality, low-cost furniture to the masses.  Creativity is a big part of marketing success and is not limited to marketers.

But science is also important to marketing.  Marketers produce interesting findings through marketing research, market modeling, and predictive analytics.  Marketers are using marketing models to make decisions and guide their investments. They are developing marketing metrics to indicate the impact of their activities on sales and profits. 

I would not say that marketing is more of an art, a craft or a science but rather that it has all these elements operating.

 

6. What is the mission of marketing?

At least three different answers have been given to this question.  The earliest answer was that the mission of marketing is to sell any and all of the company’s products to anyone and everyone.  A second, more sophisticated answer, is that the mission of marketing is to create products that satisfy the unmet needs of target markets. A third, more philosophical answer, is that the mission of marketing is to raise the material standard of living throughout the world and the quality of life. 

Marketing’s role is to sense the unfulfilled needs of people and create new and attractive solutions. The modern kitchen and its equipment provide a fine example of liberating women from tedious housework so that they have time to develop their higher capacities. 

 

7. You say that marketing must play the lead role in shaping business strategy. Do you think that business executives are fully aware of the role that marketing can play in helping the company succeed? 

CEOs tend to see marketing as a department that comes into play after the product has been made and the remaining job is to sell it.  We argue instead that marketing must be seen as setting the strategic direction for the firm.  Peter Drucker stated it well over thirty years ago:  “A company has only two basic functions: innovation and marketing.”

 

8. You have said that if a company’s marketing department can’t propose any new opportunities, they should be fired.  But are there many good opportunities still left? 

Granted that the absolute number of opportunities in an economy will vary with the business cycle and the technology cycle.  Opportunities will be scarcer during recessions and when new technologies have not yet emerged. 

But there are always opportunities!  Just look at the new products that continue to appear in catalogs such as Sharper Image or Innovation or Fascination. Any company with a product or service should be able to think of new ways to modify it, combine it, offer different sizes, or add new features or services. 

Not only can an offering be reshaped for different markets but the offering can also be seen in a new context.

I published Lateral Marketing (co-author Fernando Trias De Bes) which offers a creativity approach that differs from using vertical marketing (i.e., segmentation) to finding new ideas.  Vertical marketing works within a given market;   lateral marketing instead visualizes the product in a new context. Many examples can be cited. Today we can buy food at gas stations; we can do our banking in a supermarket; we can get access to a computer at cybercafes; we can take pictures with our cell phone; we can chew medical gum to ingest certain medicines in our body; we can eat cereal in the form of a candy bar. I can’t believe there aren’t opportunities.  I can only believe that some marketers lack the ability to see opportunities.  Marketing doesn’t have to fail during a recession, only marketers fail who lack an imagination.

 

9. What significant business opportunities would you identify in the evolving economy?

Here is my list of significant business opportunities:

  • Biotech (e.g., rational drug design, biometric measurement for security)
  • Mobile phones (e.g., micropayments through the phone, wireless devices)
  • Security (corporate and home security)
  • Niche businesses (e.g., a bank for Latinos)
  • Outsourcing
  • Storage systems
  • Automation (e.g., highway passes through toll gates)
  • Health care and medical devices
  • Robots

With any perceived opportunity, ask the following questions:

  1. Is there a substantial market?
  2. What is the competitive landscape?
  3. Can you develop a profitable business model?
  4. Can you scale up quickly?
 

 

 
 
 
   
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